October 2022: Q3 Sea Cliff - Lake Street Insider
Hello and I hope you are enjoying our great weather and local activities as of late. As the fall market is in full cycle we are seeing a big spike in inventory; due to seasonality as well as increased inventory via downward market pressure (interest rates, inflation, equity markets, etc.). With the increased inventory and depending on your preferred media outlet, there are many tales to the local market. Yes, inventory is up. Yes, sales are down. No, the market has not (and is not) crashed.
San Francisco is not a “one size fits all” market. Different market segments are performing and functioning on their separate trajectories. On the north side of town (the greater Richmond and Pacific Heights) single family homes under $2M are selling well. If they are in move-in condition, they are getting multiple offers. For reference, last quarter there were 19 sales with a median of 18 days on the market. As of this writing, there are 15 homes available and the median days on market is seven. The deduction is that entry level homes are selling quickly.
The $2M - $5M segment (the most common segment in the northwest corner of the City) as well as the $5M - $10M segment are seeing the most opportunistic buyers as the inventory counts are definitely up. The best homes in these categories are going quickly with multiple offers. In the $2M - $5M segment we had 33 sales with a median of 12 days on the market (last quarter). Currently, we have 23 available properties with a median of 22 days on the market.
The $10M+ segment is down. Citywide, we have seen nine sales over $10M (YTD) vs. 16 in the same time period last year. Top end buyers are truly measuring what they get in San Francisco vs. A+ Peninsula, Marin and out of area locales. Sadly, many buyers on the top end are finding more of their current housing / lifestyle / family needs met elsewhere.
Interest rates are now north of six percent (approx. double what they were in January) and another rate increase is expected by year-end. Buyers are obviously experiencing a large decrease in purchasing power. For example, if you are buying a $4M house and borrowing 80% of the purchase price ($3.2M), your January era payment would have been $13,491/mo. vs. $19,186/mo. today. Not trivial!
Some of the decrease in purchasing power is real; some not so much. Depending on a buyers preferred neighborhood, I am seeing some buyers get their offer ratified at approx. 15% - 20% below spring era pricing. Additionally, for buyers trading up into larger properties, they are often selling for less (than March pricing), but they are also buying at a lower price (and getting a lower tax base). That, in and of itself, is a win.
Enough of the big picture. In our corner of the city, inventory is definitely down – hence so is sales activity. For the first time in recent memory, there are no Sea Cliff sales in the second quarter. There are properties in contract; but no sales. Sea Cliff has a few available properties (four), and are we are seeing more owners taking on remodeling projects instead of selling (I’m sure you’ve noticed the increase in job sites). After a very active Q2, the Lake Street Corridor is also down in sales and inventory. I expect several homes to come online in the coming six weeks. After a slow start to the fall market, I expect the final Q4 numbers for the Lake Street Corridor to be good in terms of sales volume and pricing.
Here are the numbers for the quarter.
The top sale in the Lake Street Corridor was a very nice home just off of Lake on 9th Avenue.
Remember 224 Sea Cliff? In the ‘Q1 report I noted that someone anonymously filed a complaint with the Planning Department and the SF Bay Conservation & Development Commission in regards to the steps and landings from the home to the beach. Since then, the property went into contract – had a fire (a firefighter was injured when he fell down the elevator shaft) – and it fell out of contract. It appears the Planning Department issued a Notice of Enforcement on the home due to the fact that all steps and landings to the beach were built without proper approval and permits (and also on land other than the homeowners). The notice requires the homeowner to get proper approval and permits to remove all stairs and landings. The permits have been filed so I suspect the next step will be to go back to market after the work is complete and permits are signed off. I suspect a new price will be in order as some value was clearly lost with the beach access.
On a final note, in September alone, there were ten downtown office building owners that filed appeals with the Assessment Appeals Board to have their property taxes reduced (per a loss in value). This will be a trend across many income generating property owners in San Francisco. If you feel your property lost value and therefore is eligible for an appeal, feel free to reach out and I am happy to provide you with a valuation of your home. You can then decide to pursue an appeal or not.
That is it for now.